What are the differences between USDT and USDC? Typically, both USDT and USDC are specific types of cryptocurrencies that are tied with the same amount of fiat currency, which is 1 USD.
Both these cryptocurrencies fall under the stablecoin category and the primary objective of their creation is to lessen crypto volatility.
However, the similarities between these two crypto coins seem to end just there. There are lots of differences between them even though they sound and seem to be similar. Find out about those differences in this article.
Ideally, the value of money keeps changing constantly due to one of the most influencing factors – the financial policy of the specific country.
This affects the currency rates which, in turn, affect the profits of a business directly. It is for this change most of the investors opt to invest in foreign currencies expecting higher profits.
However, there are still some significant challenges in it that are sometimes hard to overcome. Check out Crypto vs Stock Investing.
It is for this particular reason that most people now intend to invest in stablecoin such as USDC or USDT. This helps them to trade more conveniently and all day because these specific currencies are less volatile in nature.
However, if you do not know the differences between USDT and USDC, it will be hard for you to choose the one to invest in.
- 13 Differences Between USDT and USDC
- Which is Better to Use – USDT or USDC?
13 Differences Between USDT and USDC
The difference between USDT and USDC majorly is due to the reason that these two types of stablecoin are owned by different companies.
It will help a lot if you weigh the pros and cons along with the features of each if you want to make an educated informed decision as to which to invest in.
Depending on your distinctive circumstances, with such knowledge you can get into the specifics and consider the different underlying technology over and above the fundamentals in a broader way. Here they are.
USDT was created and is managed by Tether Limited, a Hong Kong-based company and was launched in 2014. This is one of the most popular stablecoin.
However, according to history, these tokens were built originally on the Omni Protocol software which is a layer built on top of the Bitcoin network and allow creating as well as trading custom crypto coins.
Later on, it branched out to the ERC 20 network of Ethereum. However, the higher gas fees, later on, forced Tether to use more scalable blockchain such as Tron, EOS, and others.
On the other hand, USDC, another ERC 20 token, was developed by Center Internet Financial, an establishment that comprises Coinbase crypto exchange and Circle. This stablecoin was launched in 2018.
2. Coin Supply
There is a significant difference in the supply of USDC and USDT as well. According to a recent report published on July 11, 2021, the total worth of USDT in circulation in the market is 62.20 billion. In terms of market cap, it is only Bitcoin and Ethereum that have higher market capitalization than it.
On the other hand, the supply of USDC coins is worth 26.09 billion only, which is significantly low as compared to that of USDT, though it is the second biggest stablecoin after USDT. However, USDC is growing in popularity significantly.
3. Savings Inspection and Audit
Since both these coins are backed by USD, it is required to inspect the savings related to them. Typically, all of the USDT accounts are audited and inspected by Freeh Sporkin & Sullivan LLP, which is a law firm.
However, the exact time and frequency of these audits and inspections made are not known. This typically raises some concerns among the investors.
In comparison, the USDC accounts are inspected and audited by Grant Thornton. They are one of the top five financial and accounts audit and consulting firms in the world. They conduct the audit every month and even publish the audit reports on the website of Circle.
4. Blockchain Behind
Both these coins use different types of blockchain which offer different advantages such as utility, transaction speed and others. As for the USDT coins, the blockchain behind them includes Ethereum, Tron, EOS, SLP, Algorand, and OMG, apart from USDT Bitcoin.
On the other hand, when it comes to the USDC coins, the blockchain that it primarily relies on is the USDC Ethereum apart from Algorand and Solana.
5. Preferred By
Typically, the USDC tokens are more preferred by and most frequently used by the financial institutions in the United States. Also, if the customers are businesses, then these specific businesses also use these tokens to send invoices to their customers. This makes more sense.
On the other hand, in comparison, as for the USDT tokens, these are preferred by the traders and investors usually. They use these coins most frequently as a tool to stay in the crypto market as well as protect their profits.
This is because they can keep their money on the exchanges itself and thereby not be subject to the volatile prices of Bitcoin in particular. Ideally, these tokens are preferred by those businesses that have more traders as their customers.
The most significant benefit of USDT is that it will meet the need when required. Tether can make more coins and put USD into the savings account as and when there is a demand by the crypto exchanges for it to facilitate crypto pairing.
In addition to that, the USDT tokens also allow the investors to trade between other cryptocurrencies and USD more easily. This is because everyone is familiar with USD and this makes it quite simple to analyze the market conditions and identify the price trends with little effort as compared to trading with any other average crypto coins.
Also, if you have these tokens in your crypto portfolio it will make the portfolio more stable even when the crypto market experiences severe fluctuations.
It will also help you to switch from other crypto coins to holding USDT. For this, you will not even need to withdraw your funds to another fiat account.
On the other hand, the most significant benefit of USDC is that it can hold the value because its price will be more stable in comparison.
It will also offer much more transparency due to the blockchain design and allow transferring funds across the borders easily and quickly. You will not have to worry about the operation timing of the exchanges in different time zones and not need any middleman for it.
As said earlier, USDC is an ERC 20 token. This means that you can use any two Ethereum wallets to send and receive these tokens to the other person anywhere in the world more or less instantly.
You can also use these tokens by any new dApp or Decentralized Application which is specifically built on the Ethereum blockchain. This is the primary reason for these tokens being extremely popular among the DeFi community.
The holders of these tokens can easily and freely explore the varied and extensive opportunities that can be availed in high-yield savings accounts, DeFi lending, and all other possibilities.
Apart from individual users, more recently, the USDC tokens are also used by different governments to provide aid to healthcare workers and other people. These tokens are also one of the leading ones that are used as an effective tool for the US foreign policies.
On the other hand, as for the USDT, it is used by traders, especially those who are looking for an easy way to transfer funds. You can also use these tokens as a medium of exchange.
In addition to the traders, the use of these tokens is also noticed in quite a large volume by several freelancers and businesses who intend to make B2B payments.
However, there are some controversies regarding its support for USD and therefore you should conduct your own research to reach a specific conclusion.
USDC, as you may know, is the only stablecoin that is supported by the Coinbase system. It is therefore mostly preferred by the US citizens to exchange it for other crypto coins or to withdraw the balance possessed by them to the bank account.
As for the USDT, it is not supported by the Coinbase platform and therefore it has some limitations in the use case. However, there is nothing to worry about since this coin is supported by most of the crypto platforms in the market being one of the most popular stablecoin having the highest circulation volume as of now.
As for the purpose, for USDT the primary purpose is to protect the investors from volatility by allowing them to use these tokens as a trading pair on different crypto exchanges or to stack dollars against crypto coins. This results in a gradual increase in the dollar value of their crypto portfolio.
On the other hand, the main purpose of the USDC tokens is to allow the investors to mint more tokens by passing the Know Your Customer or KYC check.
They can then deposit the fiat currency earned at a 1:1 ratio on Circle. These coins can then be used within the ecosystem of Coinbase or in places other than the most obvious ones. They can redeem the US dollars afterward by giving the USDC tokens back and taking them out of the circulation.
Based on the fundamental details of the two types of coins, it can be said that the USDC tokens are a tad safer than the USDT tokens. The main reason behind it is that the USDC tokens are created by one of the biggest crypto exchanges in the world.
It is known to have both excellent security and more profitability. Most importantly, the accounts are audited on a regular basis by one of the most reliable audit firms in order to ensure solvency.
On the other hand, there are lots of arguments and concerns regarding USDT. First, Tether was originally founded in 2014 under a different brand name, Realcoin. It is not decentralized as Bitcoin or several other crypto coins available in the market today.
The entire supply of the tokens is in the hands of one single company. They are responsible for minting, owning, and managing these coins which means that there is a very little chance of being transparent.
Also, this token is not scarce unlike those coins that can be mined. In fact, the production of these tokens does not follow any code or math and therefore the supply of it cannot be ascertained.
This means that the company can mint these eponymous coins as many as they want. It can use its own currency as well as buy other cryptocurrencies.
Moreover, its infamous relationship with Bitfinex, which is a crypto exchange managed by the executive of Tether Limited, allows conducting unregulated trading and even possibly laundering money.
11. Purchasing and Redeeming
The minimum purchase and redemption limit of USDT is $100000. Moreover, purchasing or redeeming of USDT is not allowed for the US residents and both are subject to a verification fee apart from the fact that the users can make only one fiat redemption transaction in a week.
On the other hand, in comparison, the minimum purchase and redemption limit of USDC is just $100. Purchasing of USDC tokens is quite simple and easy and can be made by using credit cards or debit cards, through bank accounts and even through its issuer over Coinbase.
There is also no minimum or maximum redemption requirement when these tokens are redeemed through Coinbase.
12. Interest Accounts and Products
There are lots of blockchain finance interest products available for both the USDT and USDC users but these are different as well, though the interest rates offered by both are quite competitive in comparison to the interest rates earned in traditional finance.
For USDT, the users can earn interest with the crypto exchanges with different products such as margin funding and Binance Lending. The USDT interest accounts are backed by different centralized providers such as Nexo, Crypto.com, and Celsius Network. Remember, the decentralized interest account providers typically do not support USDT.
On the other hand, as for the USDC tokens holders, the interest can be earned on their balances in their accounts directly on Coinbase. The USDC interest accounts are also more flexible than USDT interest accounts and are available on several different decentralized platforms such as Nuo Network and Compound.
The most significant difference of the USDC interest accounts in comparison to its counterpart is that these accounts are also supported by quite a few centralized providers such as Nexo, Crypto.com, and Celsius Network.
13. Few Other Differences
There are a few other smaller yet notable differences between USDT and USDC that you must know as well.
The partnership scored by the USDC tokens is far better than the USDT tokens simply due to the trust and respect it has gained around the crypto space. It is, for this reason, you will see that even Visa allows settling payments in USDC tokens rather than USDT tokens across its payment network.
The future prospects of USDC seem to be brighter as compared to the USDT tokens since it is more favored by the regulators in the United States. This is in spite of the fact that Tether has nearly 3 times the amount of exchange volume and liquidity as of now.
The market rank of USDT is 5, whereas the market ranking of USDC is 11 which makes USDT a more popular and commonly used crypto token.
As for the issuing companies, USDT is issued by a company that is unregulated and not licensed which is not the case with USDC which makes it a more reliable token.
High maximum and low minimum loans are available on several centralized crypto lending platforms such as Nexo, Celsius Network and more on both these coins at most the competitive APR rates. You will also receive the loans instantly in flexible lockup terms.
However, USDT tokens cannot be used on decentralized finance platforms but USDC coins are supported in both with more global availability. Also, privacy focused loans are not available with USDT tokens while you can get it with USDC tokens.
Which is Better to Use – USDT or USDC?
When it comes to deciding which you should invest in and use among USDT and USDC, the short and simple answer is – it all depends on your specific needs, your unique state of affairs, and your preferences.
As for the USDT tokens, these tokens are the most popular and biggest stablecoin that offers high liquidity to the users as well.
In fact, these tokens have a cumulative trading volume of much more than $100 billion in a day which is nearly double the trading volume of Bitcoin.
This is the most liquid crypto coin in the world that allows the traders to enter or exit trades with no huge changes in the prices.
Most importantly, if you want to make trades between different types of digital currencies then the tax liability in this case will be much lower, if not entirely non-existent.
Now, the question is which among USDT and USDC is safer. Well, if you consider the technical aspects, both are essentially just the same.
This is because both are centralized tokens that are developed on a decentralized Ethereum blockchain.
This means that it will be hard to access the Ethereum wallet, or any other wallet of any crypto exchange for that matter, to take them away, whether it is USDT or USDC.
As far as the USDT tokens are concerned, these tokens have had a lot of suspicious and unwanted incidents in the past due to a lack of proper audits, making them a bit unsafe.
People believe that it lacks sufficient USD reserves to guarantee the solvency of every USDT token issued by the developer so far. In fact, recent information shows that not more than 70 to 75% of it is covered!
However, of late, Tether Limited has taken the proof of funds seriously which the crypto critics have raised serious concerns about.
In the past few years, Tether has tried to come out of the ambiguity about its USD backing to be more transparent and let people know what USDT is backed by exactly.
They have published a specific attestation report that includes the entire composition in detail regarding its reserves for the specific coin.
This however proves their commitment towards transparency. According to the report, more than half of their reserves are commercial paper or IOU notes made with the financial institutions.
These are special types of corporate lending in the short term. The remaining of their reserves includes cash, fiduciary deposits, treasury bills, and the reverse repo notes.
Therefore, if you consider the transparency and history of the two companies issuing these two coins, the USDC tokens seem to be safer.
It is even more profound since these tokens are now listed on Binance and can be paired with most of the major and relevant crypto coins for trading.
However, in terms of insurance, the USDC tokens are also not insured but that should not be a point of concern because it is debatable whether FDIC has enough deposits to cover any losses people or banks may run into.
In fact, FDIC insurance is nothing but just a feel-good factor and a scope to brag about a false and extra sense of security provided by the regular US-based banks.
Even though the USDC tokens are not FDIC insured, there is no big risk to the security because that will only be an issue when the Coinbase platform itself goes out of business.
This is far less likely to happen because they have enough cryptocurrencies to protect their dollars.
They also have top-class security in the form of cold storage for their crypto deposits apart from an expensive insurance coverage to protect them in case of hacking or theft.
If you talk about risks, then a common risk of these two types of crypto tokens lies in the long term especially and that too due to the fact that the US Dollar itself is not backed by something valuable and real to deal with situations when it loses its value.
But then that is the typical nature of the fiat currencies, which is the primary reason people protect their fiat investment portfolios with a proper and rewarding crypto portfolio nowadays.
The backing of USDT involves mostly assets that have an equal value and as for the USDC tokens it involves mostly cash and its equivalent.
In terms of trading volumes of the two coins in a day, as for USDT, it is $66.6 billion and for USDC, on the other hand, it is just $2.4 billion.
You will get a fair idea about the usage benefits of USDT especially when you look at the coins in circulation.
Ideally, traditional banks as well as major financial institutions normally want to invest in digital assets but when they do so that generally changes from fiat USD to USDT prior to buying any other currencies.
Therefore, if there is a much higher circulation of the USDT tokens in the market within a short period of time, you can consider it to be a signal of a significant rise in demand for particular crypto coins such as Bitcoin.
As for the USDC, when the value of it strays over 1 dollar, it offers an arbitrage opportunity. This allows the traders to swap US dollars for a USDC token which is now valued at $1.01 or $1.02.
This results in additional profits as well as puts more of these tokens into circulation. The eventual effect of it is that the price of the token returns to its usual peg with 1 dollar.
As for the investors, the same dynamic is effective but in a reverse manner. Here the investors are incentivized for returning the USDC tokens that are valued at less than one dollar and get US Dollars in return for that.
In such situations, this increases its worth. In both ways, the mechanism helps in keeping the price of the USDC tokens stable.
Therefore, after considering all aspects, it can be said that though the USDT tokens may seem to be a convenient option to make a quick trade, it is certainly not an ideal option if you plan anything for the long term.
USDT is good for experienced traders who are accustomed to more advanced exchange features such as margin funding and futures trading.
On the other hand, if you want to earn handsome interest on your holding in yield farming or lending, going with the USDC tokens will probably be a more prudent and rewarding bet.
Apart from the investors, USDC tokens are also good for the borrowers who want to avail a crypto loan, traders looking for protection against temporary volatility, all users who want to exchange Bitcoin and other crypto coins to fiat, and all beginners who want to step into the market with fiat.
Though both USDC and USDT are pegged with USD in the ratio 1:1, there are some specific differences in their details. Now that you know all about it after reading this article, you can step into the world of stablecoin more confidently.
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